Santa Barbara County Budget 2012 to 2014

COUNTY OF SANTA BARBARAOPERATING PLAN FISCAL YEAR 2012-13 RECOMMENDED BUDGET FISCAL YEAR 2013-14 PROPOSED BUDGETPresented in May 2012 to the

BOARD OF SUPERVISORSSalud Carbajal, Vice Chair Janet Wolf Doreen Farr, Chair Joni Gray Steve Lavagnino First District Second District Third District Fourth District Fifth District

By Chandra L. Wallar County Executive Officer Robert W. Geis, CPA Auditor-Controller

FISCAL YEAR 2012-13 RECOMMENDED BUDGET FISCAL YEAR 2013-2014 PROPOSED BUDGET

Acknowledgements: County Executive Office Tom Alvarez Budget Director Jette Christiansson Richard Morgantini Rachel Lipman Andrew Myung

Auditor-Controller Department Betsy Schaffer Financial Reporting Division Chief Ryder Bailey Juan Izquierdo Katherine WangThe Government Finance Officers Association of the United States and Canada (GFOA) presented a Distinguished Budget Presentation Award to the County of Santa Barbara, California for its annual budget for the fiscal year beginning July 1, 2011. In order to receive this award, a governmental unit must publish a budget document that meets program criteria as a policy document, as an operations guide, as a financial plan, and as a communications device. This was the fifteenth consecutive year that the County has received this prestigious award. This award is valid for a period of one year only. We believe our current budget continues to conform to program requirements, and we are submitting it to GFOA to determine its eligibility for another award.

LeAnne Hagerty Jackie Salvador

Human Resources Department

TABLE OF CONTENTSDirectory of Elected & Appointed County Officials ...v Organization Chart vi

SECTION B COUNTY STATISTICAL PROFILEThe County Statistical Profile presents a graphical and statistical view of local demographic, economic, land, environmental and social factors impacting budget and public policy making.

SECTION A COUNTY EXECUTIVE SUMMARYThe County Executive Summary contains a letter of transmittal and an overview of the Recommended Operating Plan and Budget and its key initiatives, organizational focus and strategic basis, as well as a review of economic conditions which help to shape the recommended budget.

Overview California Counties Ranked by Population...................................................................................... B-1 Authority .............................................................................................................................................. B-2 Geography ........................................................................................................................................... B-2 Population Cities and Unincorporated Area ....................................................................................................... B-2 Immigration ........................................................................................................................................ B-3 Demographics ..................................................................................................................................... B-3 Board of Supervisors .................................................................................................................................. B-4 Administration and Management ............................................................................................................ B-4 County Services Services Countywide .......................................................................................................................... B-5 Services to Unincorporated Area ...................................................................................................... B-5 Benchmark Counties Comparison ........................................................................................................... B-5 Community Safety and Health Safety....................................................................................................................................................................... B-8 Domestic Violence .............................................................................................................................................. B-9 Elder Abuse .......................................................................................................................................................... B-9 Healthcare ........................................................................................................................................................... B-10 Economic Vitality Local Economy ................................................................................................................................................. B-11 Employment and Unemployment .............................................................................................................. B-11 Tourism ................................................................................................................................................................ B-14 Residential & Commercial Real Estate ....................................................................................................... B-15 Quality of Life Air Quality ........................................................................................................................................................... B-16 Water Supply ...................................................................................................................................................... B-16 Commuting and Traffic.................................................................................................................... B-17 Citizen Involvement Electorate ........................................................................................................................................................ B-17 Participation through Electronic Government ........................................................................................ B-17

Letter of Transmittal........................................................................................................................ A-1 Solving the Budget Gap ................................................................................................................... A-3 Sustaining Public Results ........................................................................................................ A-3 Current Year Service Preservation and Cost Reduction Accomplishments ....................... A-3 More Reductions Needed for FY 2012-13 .............................................................................. A-4 Setting Future Goals to Achieve Results ................................................................................ A-5 Budgeting for a Structurally Balanced Future ....................................................................... A-5 Descretionary Revenue ................................................................................................................... A-6 Forecast Revenue Detail .......................................................................................................... A-7 Revenue Projection Assumptions .................................................................................................. A-7 Unsecured and Unitary Property Taxes................................................................................. A-8 Supplemental Property Taxes and Property Transfer Taxes ............................................... A-8 Retail Sales Tax ......................................................................................................................... A-8 Transient Occupancy Tax ....................................................................................................... A-8 Property Tax In-lieu of Motor Vehicle License Fees ............................................................. A-8 Franchise Fees .......................................................................................................................... A-8 Interest Income ........................................................................................................................ A-8 Other Revenues ........................................................................................................................ A-8 Forecast Expenditure Detail ........................................................................................................... A-8 Salary and Benefits Changes ................................................................................................. A-10 Retirement Costs .................................................................................................................... A-10 Investing in the Future .................................................................................................................. A-11 Fire Maintaining and Improving Current Service ............................................................ A-11 Sheriff New North County Jail............................................................................................ A-12 Alcohol, Drug, and Mental Health Services ......................................................................... A-12 Closing Comments ................................................................................................................ A-12 Guiding Principles ......................................................................................................................... A-13

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TABLE OF CONTENTSDevelopment and Zoning Permits ...................................................................................... C-17 Families and Children Health and Education .......................................................................................................................... B-18 Public Assistance ................................................................................................................................... B-20 In-Home Supportive Services ........................................................................................................... B-20 Franchises and Misc. Permits .............................................................................................. C-17 Oil and Gas Permits ............................................................................................................... C-17 Fines, Forfeitures and Penalties Various Fines and Penalties ................................................................................................. C-18 Property Tax Penalties ......................................................................................................... C-18 Use of Money and Property Interest ................................................................................................................................... C-19 Federal & State Revenue (Intergovernmental Revenue) Social Services Programs ..................................................................................................... C-20 Misc. Federal and State ........................................................................................................ C-20 State Realignment Allocation .............................................................................................. C-21 Summary All Funds - Expenditures and Revenues ....................................................................... C-1 Summary of Expenditures by Department .................................................................................... C-2 Summary of Expenditures by Character ........................................................................................ C-2 Summary of Revenues by Type and by Character ......................................................................... C-3 General Fund Contribution by Function ....................................................................................... C-4 Funds Available ................................................................................................................................. C-5 Available Financing and Financing Requirements ....................................................................... C-5 Fund Balance Analysis ..................................................................................................................... C-6 Major Funds Budget Summary ....................................................................................................... C-7 Taxes Principal Property Taxpayers ................................................................................................C-10 Gross Assessed Value of Property .........................................................................................C-10 Taxing Agencies Receiving 1% Property Taxes....................................................................C-11 Property Taxes ........................................................................................................................C-12 General Fund Secured Property Taxes .................................................................................C-12 General Fund Unsecured Property Taxes ............................................................................C-13 General Fund Supplemental Property Taxes ......................................................................C-13 Property Transfer Tax ............................................................................................................C-14 Property Tax In-Lieu of VLF ..................................................................................................C-14 Transient Occupancy Tax .....................................................................................................C-15 Retail Sales Taxes ...................................................................................................................C-15 Roads Sales Tax Measure D & A .........................................................................................C-16 Roads Sales Tax ......................................................................................................................C-16 Licenses, Permits and Franchises Building Permits .....................................................................................................................C-17 Proposition 172 Proceeds .................................................................................................... C-21 Health Care ........................................................................................................................... C-22 Child Support Program ........................................................................................................ C-23 State Highway Users Tax ..................................................................................................... C-23 Mental Health ........................................................................................................................ C-24 Disaster Assistance ................................................................................................................ C-24 Charges for Services Public and Mental Health Services ...................................................................................... C-25 Sanitation Services ................................................................................................................ C-25 Contractual Services ............................................................................................................. C-26 Roads Project Reimbursement ............................................................................................ C-26 Park Services .......................................................................................................................... C-27 Miscellaneous Tobacco Settlement and Proposition 10 ............................................................................. C-27 Ten-Year County Budgeted FTEs Staffing Comparison ......................................................... C-28 Significant Changes in Permanent Position Staffing ......................................................... C-29 Full-Time Equivalents Permanent and Non-permanentFTEs ............................................................................................ C-29 Budgeted Permanent vs. Non-Permanent FTEs ......................................................................... C-30

SECTION C SUMMARY INFORMATIONSummary Information provides an integrated overview of revenue and expenditures, funding sources, position allocation trends, and how the various funds (accounting entities) balance and relate to the programs.

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TABLE OF CONTENTSSECTION D OPERATING PLAN BUDGET DETAILThe Operating Plan Budget Detail presents a complete description of each department's goals and objectives, program of service, related revenues, staffing, and recurring performance measures by program cost center.

Support Services Functional Summary........................................................................................................... D-149 Auditor-Controller ............................................................................................................... D-153 Clerk-Recorder-Assessor..................................................................................................... D-161 General Services................................................................................................................... D-169 Treasurer-Tax Collector-Public Administrator................................................................. D-177 General County Programs Functional Summary........................................................................................................... D-185 General County Programs .................................................................................................. D-187 Santa Barbara County Redevelopment Successor Agency .............................................. D-194

Introduction to D-Pages ................................................................................................................ D-1 Policy and Executive Functional Summary .............................................................................................................. D-3 Board of Supervisors ............................................................................................................... D-5 County Executive Office ...................................................................................................... D-23 County Counsel ..................................................................................................................... D-33 Law and Justice Functional Summary ............................................................................................................ D-39 Court Special Services .......................................................................................................... D-41 District Attorney .................................................................................................................... D-47 Public Defender .................................................................................................................... D-55 Public Safety Functional Summary ............................................................................................................ D-61 Fire .......................................................................................................................................... D-63 Probation ............................................................................................................................... D-69 Sheriff ..................................................................................................................................... D-75 Health and Public Assistance Functional Summary ............................................................................................................ D-81 Alcohol, Drug, & Mental Health Services ............................................................................ D-83 Child Support Services ........................................................................................................ D-91 First 5 Children & Families Commission ............................................................................ D-97 Public Health ....................................................................................................................... D-103 Social Services ..................................................................................................................... D-111 Community Resources and Public Facilities Functional Summary .......................................................................................................... D-119 Agriculture & Cooperative Extension ................................................................................ D-121 Community Services ........................................................................................................... D-127 Planning and Development ............................................................................................... D-137 Public Works ........................................................................................................................ D-143

ALPHABETICAL LISTING BY DEPARTMENTAgriculture & Cooperative Extension ................................................................................ D-121 Alcohol, Drug & Mental Health Services ............................................................................. D-83 Auditor-Controller ............................................................................................................... D-153 Board of Supervisors ............................................................................................................... D-5 Child Support Services .......................................................................................................... D-91 Clerk-Recorder-Assessor..................................................................................................... D-161 Community Services ........................................................................................................... D-127 County Counsel ..................................................................................................................... D-33 County Executive Office ........................................................................................................ D-23 Court Special Services ........................................................................................................... D-41 District Attorney .................................................................................................................... D-47 Fire .......................................................................................................................................... D-63 First 5 Children & Families Commission............................................................................. D-97 General County Programs .................................................................................................. D-187 General Services................................................................................................................... D-169 Planning and Development ................................................................................................ D-137 Probation ................................................................................................................................ D-69 Public Defender ..................................................................................................................... D-55 Public Health........................................................................................................................ D-103 Public Works ........................................................................................................................ D-143 Santa Barbara County Redevelopment Successor Agency .............................................. D-194 Sheriff ...................................................................................................................................... D-75 Social Services ...................................................................................................................... D-111 Treasurer-Tax Collector-Public Administrator................................................................. D-177

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TABLE OF CONTENTSSECTION E CAPITAL BUDGET SUMMARYThe Capital Budget Summary presents an overview of the FY 2012-13 Recommended Capital Improvement Budget as well as a five-year Capital Plan. It should be noted that a separate volume presents the full Capital Budget and long-range plan in detail.

SECTION G GLOSSARYGlossary .............................................................................................................................................G-1

SECTION HIntroduction ...................................................................................................................................... E-1 Overview of Recommended CIP .................................................................................................................. E-1 CIP by Department ........................................................................................................................... E-2 CIP by Project Class.......................................................................................................................................... E-3 Significant Projects Completed in FY 2011-12 by Project Class ................................................... E-4 Five Year CIP through FY Ending June 30, 2017............................................................................. E-5 FY 2012-13 Funded Project Highlights ........................................................................................... E-6 Recommended FY 2012-13 Capital Budget .................................................................................... E-6 Table I: Summary of Departments .................................................................................................. E-7 Table II: Summary of Projects.......................................................................................................... E-9 Table III: Summary of Funding Sources ....................................................................................... E-17 Table IV: Summary of Projects Completed ................................................................................. E-22 Table V: FY 2012-13 Capital Projects Budget................................................................................ E-24 Appendix I - Fund Accounting ....................................................................................................... H-1 Appendix II - Fund Types ............................................................................................................... H-1 Appendix III - Department Full-time Equivalent (FTE) Position Summary .............................. H-6

APPENDIX

SECTION F FINANCIAL POLICIES AND BUDGET PROCESSThis section details the legal authorization that shapes the content and format of the budget and the adoption process.

Introduction ...................................................................................................................................... F-1 Financial Planning Policies .............................................................................................................. F-1 Revenue Policies ............................................................................................................................... F-5 Expenditure Policies ......................................................................................................................... F-5 Capital Improvement Program Policies ......................................................................................... F-8 Annual Budget Process ..................................................................................................................... F-9 Fiscal Years 12-13 & 13-14 Budget Development Schedule........................................................ F-15

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DIRECTORY OF ELECTED AND APPOINTED COUNTY OFFICIALS

First District Salud Carbajal, Supervisor, Vice Chairwww.countyofsb.org/bos/carbajal

Community Services Herman Parker, Directorwww.sbparks.org www.countyofsb.org/housing

Probation Department Beverly Taylor, Chief Probation Officerwww.countyofsb.org/probation

Second District Janet Wolf, Supervisorwww.countyofsb.org/bos/wolf

County Executive Officer Clerk of the Board Chandra L. Wallar, County Executive Officerwww.countyofsb.org/ceo

Public Defender Raimundo Montes De Oca, Public Defenderwww.publicdefendersb.org

Third District Doreen Farr, Supervisor, Chairwww.countyofsb.org/bos/farr

County Clerk Recorder Assessor Joseph Holland (Elected)www.sbcassessor.com

Public Health Services Dr. Takashi M. Wada, MD, MPH, Directorwww.sbcphd.org

Fourth District Joni Gray, Supervisorwww.countyofsb.org/bos/gray

County Counsel Dennis Marshallwww.countyofsb.org/counsel

Public Works/Flood Control Scott McGolpin, Directorwww.countyofsb.org/pwd

Fifth District Steve Lavagnino, Supervisorwww.countyofsb.org/bos/lavagnino

Court Special Services Gary Blair, Executive Officerwww.sbcourts.org

Sheriff William F. Brown (Elected)www.sbsheriff.org

Agriculture & Cooperative Extension Cathleen Fisher, Agricultural Commissionerwww.countyofsb.org/agcomm

District Attorney Joyce Dudley (Elected)www.countyofsb.org/da

Social Services Kathy Gallagher, Directorwww.countyofsb.org/social_services

Alcohol, Drug, and Mental Health Services Ann Detrick, Directorwww.countyofsb.org/admhs

Fire Department Michael Dyer, Chiefwww.sbcfire.com

Treasurer-Tax Collector-Public Administrator Harry Hagen (Elected)www.countyofsb.org/ttcpapg

Auditor-Controller Robert W. Geis, CPA (Elected)www.countyofsb.org/auditor

General Services Robert Nisbet, Directorwww.countyofsb.org/gs

Child Support Services Carrie Topliffe, Directorwww.countyofsb.org/dcss

Planning and Development/Strategic Planning Glenn Russell, Directorwww.countyofsb.org/plandev

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County of Santa Barbara Organization ChartElectorateBoard of Supervisors Salud Carbajal- First District, Vice Chair Janet Wolf- Second District Doreen Farr- Third District, Chair Joni Gray- Fourth District Steve Lavagnino- Fifth DistrictAppointed Elected Official Appointed by Presiding Judge

Boards, Commissions & Committees

Special DistrictsFor which the governing board is the County Board of Supervisors

Dennis MarshallCounty Counsel

Chandra L. WallarCounty Executive Officer

Renee BahlRobert W. GeisAuditor-Controller Assistant County Executive Officer

Terri Maus-NisichDennis BozanichAssistant to the CEO Assistant County Executive Officer

Joyce DudleyDistrict Attorney

Cathleen FisherAgricultural Commissioner

Tom AlvarezBudget Director

Ann DetrickAlcohol, Drug, and Mental Health Services

Herman ParkerCommunity Services

Michael HarrisEmergency Management

Joseph HollandClerk-Recorder-Assessor

Carrie TopliffeChild Support Services

Robert NisbetGeneral Services

Michael DyerFire Chief

William F. BrownSheriff-Coroner

Glenn RussellPlanning & Development

Pat WheatleyFirst 5 Children & Families Commission

Jeri MuthHuman Resources

Harry HagenTreasurer Tax Collector, Public Admin/Guardian

Rai Montes De OcaPublic Defender

Takashi M. Wada, MD Beverly TaylorChief Probation Officer Public Health

Scott McGolpinPublic Works

Kathy GallagherSocial Services

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EXECUTIVE SUMMARYMay 15, 2012 The Honorable Board of Supervisors County of Santa Barbara 105 East Anapamu Street Santa Barbara, CA 93101 Chair Farr and Board Members: The proposed Fiscal Year (FY) 2012-13 County of Santa Barbara Operating Plan is submitted for your consideration, possible amendment, and adoption. Your Board will notice a change in the look and composition of the Plan. This is a result of a project to overhaul the Plan to enhance the clarity of information for the public, focus on performance outcomes, and provide a future perspective by inclusion of a FY 2013-14 proposed budget. The Plan was prepared in accordance with the Boards adopted budget policies and with consideration of the Boards focus on maintaining public safety, protecting our children and families, and supporting sustainable communities. The FY 2012-13 proposed Plan recommends expenditures totaling $800.1 million. Funding sources include $745.7 million from revenues and approximately $54.4 million, net ($82.4 million less $28.0 million) from fund balances. Staffing levels are proposed to increase by 87.7 FTEs from the FY 2011-12 Adopted Budget to 3,801.4 FTEs, down 533.9 FTEs since FY 2002-03. The increase in recommended FTEs is primarily in Public Safety department personnel related to AB109-State Criminal Justice Realignment and in the Health and Public Assistance departments based on available Federal and State funding. Figure 1: FY 2012-13 Recommended Budget at a Glance The magnitude of projected deficits in FY 2012-13 and beyond requires substantial changes in both spending and revenue. The Board of Supervisors will need to make significant policy decisions and difficult budget choices. To support these efforts the County Executive Officer (CEO) will initiate an update of the Countys Strategic Plan beginning with a workshop to identify the Boards priorities. The goal of the planning process will be for the County to develop a strategic vision for the future which provides a roadmap to fiscal sustainability and a clear focus on the services most needed and valued by our residents. The Strategic Plan will identify opportunities and threats facing the County and those critical actions needed to position the County for future success. Objectives in the Plan will focus on finding ongoing solutions instead of one-time fixes, managing and reducing workforce costs (salary, healthcare, retirement and workers compensation), defining core services, reducing deferred infrastructure maintenance, raising new revenues with efforts that stimulate economic vitality, and building a financial reserve to enable the County to weather future economic downturns. Employee salary and benefit costs (including retirement and healthcare) continue to rise, especially with public safety members. The end result is less services at a higher cost. It is anticipated the required County retirement contribution will increase by $6 million in FY 201213 with an additional increase of $18 million in FY 2013-14. , Beginning in FY 2012-13 all future non-safety employees will be in a new retirement tier that increases the retirement age and reduces the amount of the pension. Last fiscal year many employee groups came to the negotiating table to assist with helping the County close a $72 million budget gap. In total they offered salary and benefit concessions which resulted in approximately $15 million of savings in FY 2012-13, however some of these savings are one-time in nature such as furloughs. It is imperative the County continue concession discussions with public safety unions to reduce or eliminate previously negotiated salary increases and implement a less costly retirement tier for new employees. The immediate financial impacts of dissolution of the seven Redevelopment Agencies (RDA) within Santa Barbara County are still unknown. Oversight Boards, representing the major taxing entities in each former RDA, have been appointed to wind down the operations, determine each former RDAs enforceable obligations, and return the remaining tax increment to the taxing A-1 Santa Barbara County continues to face significant internal challenges such as increases in employee retirement and health care costs, reliance on one-time funding solutions, deferred maintenance of critical infrastructure, funding of a new North County Jail, increasing cost of Fire Department operations, and lack of new revenues. Additionally, external factors such as the Great Recession, the nationwide anemic economic recovery, and inability of the State to balance its budget often result in the realignment of State programs to counties without guaranteed funding. All these factors increase the uncertainty of achieving a structurally balanced County budget.

Budget at a Glance(Dollars in Millions) Actual FY 10-11 Adopted FY 11-12 Recommended FY 12-13 Proposed FY 13-14

Total Revenues Other Financing Sources Total Sources Total Expenditures Designated for Future Use Total Uses Staffing FTEs

$743.7 $144.7 $888.4 $766.5 $113.4 $879.93,911.7

$749.1 $116.8 $865.9 $825.0 $40.9 $865.93,713.7

$745.7 $82.4 $828.1 $800.1 $28.0 $828.13,801.4

$741.5 $86.5 $828.0 $800.6 $27.4 $828.03,797.5

Executive Summary (contd)

entities. It is anticipated this process will continue over the next several months. Upon satisfaction of all former RDA enforceable obligations, which could take as long as thirty years, it is estimated the County and its dependent districts will receive approximately $9.4 million (in 2012 dollars) of tax monies that had previously been directed to the seven RDAs. Funding of your Boards priority to ensure a safe community continues, as reflected by the increasing percentage of expenditures made in the areas of Public Safety (Sheriff, Probation and Fire) and Law and Justice (District Attorney, Public Defender and Courts). This shift of funding to address priority needs has resulted in a critical underfunding of community resources departments (Community Services including parks, housing, and libraries, Planning and Development, and Agriculture) and internal support services (Auditor-Controller, ClerkRecorder-Assessor, General Services, and Treasurer-Tax Collector). Further reductions in funding and staffing for these programs will result in the deterioration of the quality of life so valued by Santa Barbara County residents and a significant increase in the risk of financial losses from lack of staff to manage and maintain public infrastructure, appraise property, collect taxes, and ensure the fiscal integrity of County activities. The charts below show the percent of total County expenditures for these departments in FY 2002-03 in comparison with those proposed in the FY 2012-13 Operational Plan. Figure 2: General Fund 10 Year Comparison (Increasing percentage of expenditures in Public Safety)

FY 2012-13 will be a challenging year for your Board to achieve fiscal sustainability and provide for the increasing demand for public services. The proposed FY 2012-13 County of Santa Barbara Operating Plan will meet this goal. Equally important is the ability of your Board to see into the future and prepare for the even greater challenges to be faced in FY 2013-14 and beyond. Over the course of the next several budget cycles your Board will need to demonstrate its commitment to address the structural deficit in revenues to fund expenditures. The Board must avoid the cliffs caused by dependence on one-time funding solutions and steer a course that leads the County toward ongoing revenues that adequately fund needed services while setting aside reserves for addressing deferred infrastructure maintenance, future economic downturns and other unexpected costs. FY 2012-13 is a year to position the County to take on the challenges of the future. As an organization we are already looking to FY 2013-14 and developing plans to address looming threats. Through the strategic planning process, the County of Santa Barbara will take steps to look into the future to determine the action steps required to align the available resources with the publics service expectations. This is a time for vision, imagination and creativity and the organization stands ready to address the challenges ahead; we will succeed. Respectfully submitted,

FY02-03 AdoptedPublic Safety 34%

Health & Public Assistance 13%

FY12-13 Recommended

Health & Public Assistance 9%

Community Resources & Public Facilities 8%

Community Resources & Public Facilities 7% Support Services 10%

Chandra Wallar County Executive Officer

Law & Justice 13% Policy & Executive 6%

Support Services 13% General County Programs 13%

General County Programs 4% Public Safety 50% Law & Justice 14% Policy & Executive 6%

A-2


Solving the Budget GapSustaining Public Results The current fiscal year began with anticipation of the most significant financial and employee reductions in recent memory. The budget for FY 2011-12 closed what would have been a $72 million budget gap and employees, service departments, support departments and the public were prepared to feel the impacts. Through planning, dedication and leadership, the staffing and service changes were implemented. Difficult circumstances often lead to surprising results. Current Year Service Preservation and Cost Reduction Accomplishments Some examples during the current fiscal year of organization-wide efforts to manage expenses to preserve valuable public services include: Completed negotiations with all general (non-public safety) labor groups that reduce current and future year salary and benefit obligations and create a lower cost retirement plan for new employees

Provided extensive staff support, received the recommendations and directed the use of proposals of the "Retirement Reform Working Group" in negotiations with labor groups

In addition to countywide strategies, department-specific service preservation and cost reduction measures have also been implemented. Some examples: Fire protection and prevention are vitally important to the public. This past year a comprehensive analysis was conducted on the effectiveness of the Fire Department in responding to calls including any gaps or excessive service areas. Additional analysis was conducted on the support services and financial resources required to maintain a modern firefighting program. The final report indicated that service levels and the location of fire stations are appropriate for the current population. According to the report, additional financial resources will be required to meet operational and capital needs in the years ahead. The Fire Department has created a multi-year plan to implement the report recommendations as funding becomes available. Helicopters and fixed wing aircraft provide fire fighters and law enforcement a key tool in protecting the public. The Board Sub-committee on Public Safety Aviation conducted a thorough fact finding process and made recommendations to the full Board of Supervisors. The Board adopted unanimously the recommendation to combine the separate Fire Department and Sheriff Department aviation programs to create a multi-mission (law enforcement, fire, and rescue) joint unit within the Sheriffs Department. The combined unit will save tax payers just over $250,000 a year while providing an enhanced level of aviation service. The Mental Health Services Act (MHSA) Prevention and Early Intervention (PEI) Funding Stream has as one of its priorities - support to culturally underserved communities. In Santa Barbara County, underserved communities who fall within the priorities of the MHSA PEI funding include Latino, Oaxacan, Native American and LGBTQ (lesbian, gay, bisexual, transgender and questioning). The Promotora program specifically provides for community health educators to culturally underserved communities to offer educational workshops, discussion groups and support groups to address individual and family member mental and wellness topics. Additionally culturally appropriate training sessions are provided for community leaders and service providers and culturally and linguistically appropriate case management is provided to ensure linkages to services.

Implemented department consolidations designed to deliver more effective services to the public while reducing overhead expenses Improved the budget development process by focusing on strategic accomplishments, anticipating the financial needs for FY 2012-13 and FY 2013-14, identifying specific operational objectives and reporting on service outcomes rather than process outputs Participated in business forums to explore opportunities for public-private partnerships and promote increased economic vitality Explored strategies for revenue enhancement including an oil production tax, economic development, fee adjustments and increasing the Transient Occupancy Tax in line with other jurisdictions Developed and implemented a special event coordination process which provides event organizers and the public a consistent and comprehensive review of large public events taking place in or on County facilities Continued the examination of all requests to fill positions for funding stability, customer service impacts and other considerations before approving, delaying or denying the filling of a vacant position A-3


The Countys former Redevelopment Agency (RDA) was dissolved on February 1, 2012 as required by recently enacted legislation known as ABX1 26. As part of the dissolution process, the County of Santa Barbara chose to become the Successor Agency to the former RDA. In its role as Successor Agency, the County is responsible for winding down the affairs of the former RDA and disposing of its assets a process that has required, and will continue to require a significant amount of staff time and County resources. The dissolution of the former RDA is significant because the County, along with several special districts under the Countys control, are the direct beneficiaries of the proceeds gained from liquidation of the former RDAs assets. It will be important that the County direct an expeditious and orderly dissolution of the former RDA to ensure that maximum value is gained from its assets. The State of California adopted Public Safety Realignment (AB 109) to reduce costs by shifting prisoners and parolees from the state prison system back to counties. Counties would be provided financial resources to provide the appropriate incarceration, supervision, case management, treatment services and other services to reduce future criminal behaviors. AB 109 services were implemented in October 2011 by the Countys Probation, Sheriff, District Attorney, Public Defender and Alcohol, Drug and Mental Health Services Departments. Increased cooperation and planning between the many departments have thus far resulted in being able to deliver the required services on budget although 50% more individuals are being served than had been expected. Caseload growth in public assistance programs, specifically CalWORKS/Welfare-toWork and CalFresh (Food Stamps) are a real-time indicator of the local economic climate. Over the last several years, caseload has continued to rise while overall state allocation for the cost-of-doing-business has been capped. In order to maintain core service delivery requirements, Social Services staff has worked to implement innovative systems such as a Call Center, on-line applications, application assistance by non-profits, and business process efficiencies to manage the over 60% growth in workload.

the Board. To the extent possible, the proposed budget seeks to minimize the impact of reductions on the community. Below are some of the most significant areas of reduction proposed for FY 2012-13 that will directly impact the public: Sheriff: Eliminate gang team, reduce two detective positions, reduce narcotics team by four positions, reduce the hours at the Santa Maria Branch Jail to nights only and reduce four Court bailiffs. Clerk, Recorder, Assessor: Eliminate 2.6 positions in the Assessors division, and 2.0 positions in the Elections division office and 1.0 position in the Clerk-Recorder division which may result in closure of a branch office. Community Services: Eliminate 6.5 park ranger and park maintenance positions, continue closure of Guadalupe Dunes Park two days a week, eliminate funding the Human Services Commission, reduce shelter support, reduce housing program staff, eliminate conference and visitor bureaus and Film Commission funding and reduce landscape maintenance at County facilities. Alcohol, Drug and Mental Health Services: Reduce homeless-related contracts, reduce contracted psychiatric inpatient beds and reduce Psychiatric Health Facility (PHF) costs at mid-year. Agricultural Commissioner: Reduce pest/pesticide inspector and reduce Cooperative Extension contract. Planning and Development: Reduce staff in Long Range Planning, technology support, permitting, grading inspectors and staff that worked on Redevelopment Agency (RDA) projects. Fire: Eliminate Engine 11 in Goleta; reduce a fire fighter at Station 22 (Orcutt) and a fire engineer/paramedic at Station 51 (Lompoc). Treasurer-Tax Collector: Reduction of one staff position for Veterans Services and the elimination of the Representative Trust Fund program that provides benefit management services to the mentally ill.

More Reductions Needed for FY 2012-13 Despite these efforts undertaken by departments to maintain and even enhance services in a time of scarce resources, the Countys budget must be balanced. The County Executive Office is reducing two more positions, one each in the Office of Emergency Management and the Clerk of A-4


Setting Future Goals to Achieve Results Now more than ever, the County is focusing on defining specific goals and objectives. Planning to effectively meet the publics needs for services takes commitment and focus. In FY 2012-13 staff efforts will include: Initiating a broad strategic planning that engages the Board of Supervisors, County departments and the public in a sustained effort to identify resources, needs, goals and actions necessary to transform the organization to the new normal. Delivering a proposed and adopted budget document that is transparent, easy to understand, provides policymakers and the public with valuable information and provides a longer view of the fiscal opportunities and challenges. Integrating three social service programs--Adult Protective Services, Child Welfare Services and Foster Care that were "realigned" to the counties through additional nonguaranteed revenue. Local redesign of these programs to meet the Countys needs will be a challenge due to the state and federal service mandates associated with the programs. Conducting the Alcohol, Drug and Mental Health Services (ADMHS) operational review will build on the success of internal efforts, provide for a comprehensive analysis of inpatient and outpatient client service delivery options and identify additional efficiencies and cost saving measures to enhance the overall delivery of a spectrum of services provided by the department. Developing a marketing and promotional plan to increase park visitorship and enhance appreciation of the County park system through advertising, online reservations system, and greater concessions to attract new visitors to county parks and increase lengths of stay. Increasing park visitation will have a positive local economic impact. Establishing a Leadership in Energy and Environmental Design (LEED) requirement for new County buildings and remodels of County space will increase building operating efficiency and decrease energy use resulting in long term cost savings. Updating the Winery Ordinance to address community and business interests which includes a review of potential amendments to permit requirements and development standards for wineries and associated activities including wine-tasting, food service, events, and sale of non-agricultural products. A-5

Budgeting for a Structurally Balanced Future During the past four years significant staffing and service level reductions have been required to balance the budget while maintaining a prudent level of strategic reserves. The reasons for these reductions were primarily: The decline in growth of property tax related revenues Increasing salary and benefit costs

Reductions were moderated by the use of one-time funding for ongoing services. The continued use of one-time sources to fund ongoing operations is unsustainable. Fortunately the County had built up some fiscal reserves over the years that allowed service levels to be maintained to a degree and avoided dramatic budget cuts during this economic downturn. The Board of Supervisors has chosen to use one-time funding to mitigate some service level reductions for high priority programs, but this practice cannot be sustained as the availability of the Countys reserve funds has significantly decreased. Structural deficits develop when ongoing expenditures are not reduced to meet available ongoing revenue. In a time of large expenditure growth, primarily in the area of employee salaries and benefits, and nearly flat revenues, the use of onetime funding to fill the gap exacerbates the problem in future years. To better understand the challenges on the horizon, the Countys five-year forecast provides a snapshot of the anticipated revenue and cost growth in the near future. The five-year forecast of discretionary General Fund revenues are intended to provide a context that may be helpful in weighing the financial consequences of current year decisions. In keeping with prior forecasts, the revenue projections focus on discretionary General Fund revenues. Discretionary revenue is derived primarily from local taxes, especially taxes on property and property transactions. On the expenditure side, the forecast projects the use of discretionary revenue for salaries and benefits, maintenance of effort requirements, and other specific uses directed by the Board of Supervisors.


Discretionary RevenueFigure 3: Five-year Forecast of Local Discretionary RevenueFive Year Local Discretionary Revenue275.0

Figure 4: Five-year Forecast of Local Discretionary Revenue and General Fund Contribution

250.0

Dollars

(Millions)

225.0

214.8200.0

221.9

197.4175.0

197.32009-10

198.52010-11

199.3

199.8

203.7

208.7

2008-09

2011-12

2012-13

2013-14

2014-15

2015-16

2016-17

In FY 2011-12, Cost Allocation Plan (CAP) revenues were added to discretionary revenues. The graph above excludes these CAP revenues ($9.0 million in FY 2011-12) to avoid distortion of the revenue trend. CAP revenues are included in revenues in Figure 4 on the next page to evaluate the gap between revenues and required General Fund Contribution. Figure 3 above demonstrates discretionary revenue growth of $2.4 million or 1.2% for the five year period 2008-09 to 2012-13 or 0.24% per year. By contrast, the discretionary revenue for the five year period ending in FY 2007-08 averaged approximately 13% growth. This reduction in revenue growth is a key factor impacting the Countys recent budgets as these revenues previously funded the expenditure growth in prior years. Figure 4 on the next page shows the projected gap in discretionary revenue versus the required General Fund Contribution to maintain FY 2011-12 services levels. (Note that the discretionary revenue figures in Figure 4 include the CAP revenue of $9.0 million in FY 2011-12, as previously discussed.)

This chart demonstrates a continuing structural deficit for the County. The forecasted gap between revenue and General Fund Contribution to meet expenditures is driven by: The use of $6.9 million of one-time sources to maintain levels of service for FY 201213 which, with relatively flat revenue projections, continue the structural imbalance in future years; A General Fund base budget that is higher than is sustainable by annual revenues requiring reductions in the cost of providing services or reductions in services; A structural imbalance within the Fire Department as the growth of its primary revenue, a dedicated portion of the property tax, fails to match the growth of its expenditure demands; Continuing strong demands for mandated social services as a result of the recessionary economy;

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Diversion of General Fund Contribution (GFC) for the future operation of a new County jail, a strategy that incrementally increases GFC each year and significantly closes the budget gap that would otherwise be created in future years; Increased use of local discretionary revenue to meet the Public Health Departments Maintenance of Effort (MOE) as prior fund balances are depleted and GFC is needed to maintain service levels; Assumed annual overall cost increases for wages and benefits of 3.0% for FYs 201415 through 2016-17; Increases in the actuarial cost of funding existing retirement obligations of 21.8% and 21.2% in FYs 2010-11 and 2011-12, respectively, and a cumulative $95.7 million (353.1%) increase since FY 2000-01;. Flat revenues slowly rebounding as the economy improves with a negative adjustment related to the Goleta Revenue Neutrality Agreement, whereby the Countys share of certain sales and transient occupancy taxes expire in FY 2012-13. There will be a positive revenue effect from the dissolution of the former Redevelopment Agencies (RDAs) however, the impact is not yet determinable and is therefore not reflected in these projections.

Figure 5: Five-year FY 2012-13 through FY 2016-17 Discretionary Revenue Projections

This gap is ongoing and demonstrates that future costs exceed the available ongoing discretionary revenue by $12.1 million in FY 2013-14 and by $18.3 million in FY 2016-17 as the expenditures increase and as one-time sources cease to be available to support expenditure levels. Closing the gap will require services to shrink, employees to be compensated less, and/or new revenue sources to be created, from economic development, natural growth of the economy, fee increases, and/or voter approved tax increases. Forecast Revenue Detail The revenue forecast projects that FY 2009-2010 marked the low point for local discretionary revenues at $197.3 million. Modest increases in discretionary revenue have occurred since that time and are expected to continue during the forecast period. The nation fell into a recession in the second half of 2008 following the real estate market crash and precipitated by the turmoil in the financial markets. Californias economy showed an even more troubled trend. It is estimated that the economic recovery will continue; however, as a result of the adjustment from the Goleta Revenue Neutrality Agreement, the net increase is projected at 0.30% in FY 2012-13, increasing by 1.94% in FY 2013-14, 2.46% in FY 2014-15, 2.89% in FY 2015-16 and 3.29% in FY 2016-17.

Revenue Projection AssumptionsSecured Property Taxes are the largest element of Discretionary Revenues and generally represent 55% - 60% of total Discretionary Revenues. Over the past five years, annual increases in the assessed value of properties have ranged from 0.5% to 4.6% percent and were 1.4% in FY 2011-12. Unlike other California jurisdictions, the Countys secured property tax did not experience negative growth during the recent recession; however, this modest growth is not keeping pace with increasing costs. The Recommended FY 2012-13 budget for Secured Property Tax revenue is based on a 2.14% increase in Secured Property Tax from the FY 2011A-7


12 estimate. The growth rate shows continued growth of 2% in FY 2013-14, strengthening to 2.5% in FY 2014-15, 3.0% growth in FY 2015-16 and 3.5% in FY 2016-17. Unsecured and Unitary Property Taxes Unsecured tax revenues have remained stable in recent years and are projected to rise modestly over the coming years. The most significant variable is the level of activity of contractors for various satellite ventures at Vandenberg Air Force Base. Changes here could cause fluctuations in future unsecured property tax values, and thus future unsecured tax revenues. Unitary taxes which are based on State assessments of railroads, inter-county pipelines and communication cables (including fiber optic) running through the County have shown declines in the past four years. Supplemental Property Taxes and Property Transfer Taxes Both revenues are directly dependent on property sales prices and the number of transactions. Supplemental property taxes are based on existing assessed value compared to the sales price and any new construction. Property transfer taxes are levied at $1.10 per $1,000 of the sales price of the property transferred. Thus, they are a leading indicator of future secured property tax growth. Supplemental property taxes are expected to begin recovery in FY 2012-13. The Property Transfer Taxes are budgeted to grow based on the expectation of an increasing number of sales and stabilizing sale prices. These taxes peaked in FY 2005-06 at approximately $14 million and are projected to be about $4.5 million in FY 2012-13. Retail Sales Tax The sales tax began to rebound in late 2010 and early 2011, resulting in actual growth of 8.4% in FY 2010-11. Solid growth continued in FY 2011-12 and is projected to be 8.0%. The FY 201213 forecast shows a decrease of 10.8% reflecting the anticipated change in sales tax associated with the City of Goleta Revenue Neutrality Agreement. Prior to FY 2012-13, the County received 50% of the Retail Sales tax generated in the City of Goleta. Beginning in FY 2012-13 the County will receive 30% of retail sales. Sales tax growth projections will be on a smaller tax base and therefore there will be a decrease in sales tax revenues. This Goleta Neutrality shift results in an estimated net ongoing annual revenue loss beginning in FY 2012-13 of approximately $1.1 million. Transient Occupancy Tax (TOT) This source of revenue is highly dependent on tourism and the availability of lodging in the unincorporated County. The County experienced significant growth in the transient occupancy tax revenue in FY 2010-11 of 17.3% and projects continued growth of 11.3% in FY 2011-12 Growth in TOT is anticipated to continue in FY 2012-13; however, this is more than offset by a loss of revenue from the shift in the City of Goleta Revenue Neutrality Agreement. Therefore, there will be a decrease in revenues as the growth rate will be applied to a smaller base. The Goleta Neutrality shift results in a net ongoing annual revenue loss beginning in FY 2012-13 of $1.38 million. A-8

Property Tax In-lieu of Motor Vehicle License Fees Prior to FY 2004-05, the County received a share of vehicle license fee revenues collected statewide based on a population formula. Beginning with FY 2004-05, the State, as part of a complicated revenue reduction and refunding plan, has replaced (swapped) this source with property taxes. A portion of the property tax revenues that are taken from local governments to fund schools are returned to cities and counties in lieu of vehicle license fees. From the FY 200405 base, now adjusted, revenue growth is based on property tax growth. Thus, increases in these revenues mirror secured property tax revenue projections. Franchise Fees About 45% of these revenues come from cable television franchises, the other 55% are from gas and electric utilities. Franchise fee revenues are expected to remain flat in FY 2012-13 and modestly increase beginning in FY 2013-14. Interest Income Interest income earnings are volatile and are based on the amount of cash in the treasury and the interest rate earned. Interest earnings have decreased in recent years due to declining interest rates; however, the actual cash balances have been modestly increasing. This projection assumes a stable State budget, no further reduction to the interest rate and continued modest improvement of cash balances. Other Revenues This category has four main components: 1) State payments, other than payments in lieu of vehicle fees, 2) cost allocation use allowance revenue (internal charges) for structure and equipment use, 3) federal payments in lieu of property taxes, and 4) property tax delinquency penalties. State payments averaged $1.6 million a year until Williamson Act subventions were reduced. The forecast assumes these revenues, annually approximating $600 thousand, will not return. Federal payments have been flat and are about $1.6 million annually. Cost allocation use allowance revenue fluctuates between $1.1 and $2.3 million. For planning purposes, cost allocation revenue estimates are at the low end of this range. Property tax delinquency penalties are anticipated to drop in FY 2012-13 and continue to decrease in the forecast period. Together, these and the remaining revenues that comprise the category of Other Revenues generate approximately $8.9 million per year and are projected to remain relatively flat over the forecast period.

Forecast Expenditure DetailThe expenditure forecast depicts how the local discretionary revenue is anticipated to be required. Local discretionary revenue is primarily spent as base budgets, for General Fund departments, to fund operations. The remaining local discretionary revenue is either designated for one-time needs or used to fund maintenance of effort requirements for non-General Fund


departments. The forecast is comprised of three categories: 1) non-salary cost increases, 2) maintenance of effort increases, and 3) salary and benefit increases. Total local discretionary revenue is appropriated in three broad ways. First, in FY 2012-13 the base budget for General Fund departments (the General Fund target) totals $165.3 million. Second, the budget earmarks $3.9 million for certain future uses including deferred maintenance, Board contingency, a designation for future capital projects, and a designation for future jail operations. Third, the remaining $29.3 million available in local discretionary revenue is recommended to be appropriated for maintenance of effort requirements or payments to a nonGeneral Fund department for specific services, such as local match for transportation funding in the Road Fund. The Five-year Expenditure Projections table (Figure 6) includes actual and projected numbers. Actual amounts are included for FY 2009-10 through FY2010-11 and budgeted figures are presented for FY 2011-12 and FY 2012-13 (FY 2012-13 is the Recommended Budget). These figures are shown to the left of the vertical double line while forecast projections are to the right of the double line. The top portion of the table includes aggregate numbers of the three uses of discretionary revenue. The bottom portion of this table details the major components of NonSalary and Salary related costs. Figure 6: Five-year FY 2011-12 through FY 2015-16 Expenditure Projections

Cost of maintaining the Fire departments level of service, Anticipated certificate of participation (COP) payments for the north County jail construction costs Operating costs of the new north County jail, and Funding for ADMHS not related to current year maintenance of effort requirements.

The Fire Departments current level of service is not sustainable with existing funding sources, contracted salary increases and anticipated additional cost of benefits. This is confirmed by the Fire Departments analysis and a report prepared by an independent consultant, Citygate. Beyond existing service levels, the Citygate report detailed areas of additional staffing, facilities and equipment that they recommend should be expanded. The Board has directed that the County Executive Officer (CEO) evaluate an increase in funding for the Fire Department from or tied to property taxes such that funding would increase as property values recover. This tax exchange is currently being investigated and is not complete at the time of this writing; therefore, an estimated increase in funding of $600 thousand per year is projected in FY 2013-14 forward to reflect the Boards request. This adjustment assumes that $5.9 million of General Fund would be replaced by property tax revenues. In the meantime, the Fire Department has made certain service reductions to balance FY 2012-13; including the removal of Engine 11 in Goleta; reduced a fire fighter at Station 22 (Orcutt) and a fire engineer/paramedic at Station 51 (Lompoc). The above reductions, totaling approximately $2.3 million are included in the FY 2012-13 recommended budget figures. The construction of the north County jail is expected to be funded by a combination of State and local funding. State funding is projected to be $80 million and local funding is planned to be $15 million (local funding includes $5.7 million already spent, primarily on the land). The State grant has been approved in the amount of $60 million and it is anticipated that an additional award of $20 million will be forthcoming. Based on these assumptions, debt service for the Countys local match is projected to begin in FY 2015-16 in the amount of $860,000. In addition to the construction costs mentioned above, the annual costs to operate the new jail are projected to be $17 million. In order to establish such a significant annual General Fund allocation, the Board of Supervisors adopted a Budget Policy in FY 2011-12 to establish an incrementally increasing annual General Fund Contribution to this jail operating fund. A schedule of the planned operating debt service payments is included later in this section. There is no allocation of additional General Fund for Alcohol, Drug and Mental Health Services (ADMHS); however, it is an area of potential exposure and is discussed further in this section.

Non-salary cost increases for FY 2013-14 and future years are detailed in the bottom portion of the table by year and include the following: A-9


Salary and Benefit Changes The bottom section of Figure 6 details the major categories of Salary and Benefit changes which include anticipated personnel related expenditures. They are determined based on negotiated Memoranda of Understanding (MOU), health insurance and retirement benefit cost projections, and mandated costs such as Social Security contributions. Additionally, the County is currently funding certain Other Post Employment Benefits (OPEB) related to providing medical coverage to retirees. The assumptions behind these increases include: Salaries for FY 2012-13 and 2013-14 are based on detailed positions by department (salary model), existing wages, concessions (temporary and permanent) and any scheduled wage increases per MOU with the various bargaining units. These wage increases will primarily come into effect in FY 2013-14 as concessions expire. Salary cost estimates for FY 201213 and FY 2013-14 of this forecast incorporate current terms of negotiated MOU. The chart below lists the expiration dates of the MOU by Employee Organization. The County is currently engaged in concession bargaining with the four safety groups below and the one non-safety group with an expired contract. Executive and management salaries have been subject to a wage freeze since January 2008.

Retirement Costs Figure 8: Increasing Pension Contributions since FY 2003-04

Pension Contributions($millions) $140 $120 $100 $80 $60 $40$37.5 $41.2 $57.9 $49.5 $66.1 $69.5 $70.5 $98.7 $85.8 $122.9 $104.7

Figure 7: Memoranda of Understanding (MOU); Listing by Expiration DateGroup SEIU Local 721 Engineers and Technicians Association SEIU Local 620 Probation Peace Officers' Association Union of American Physicians and Dentists Deputy District Attorneys'' Association Fire Fighters Local 2046 Deputy Sheriff's Association Sheriff's Managers' Association Current MOU Expires Currently in Negotiations 6/23/2013 6/23/2013 9/29/2013 11/24/2013 12/8/2013 3/2/2014 2/15/2015 4/12/2015

$20 $-

No enhancements of health or retirement benefits are projected; however, retirement costs, especially those for public safety members, are projected to increase based on the most recent actuarial report. See description of retirement costs on the next page. All costs associated with salaries and benefits beyond FY 2013-14 are projected to be relatively flat and are projected at an annual increase of 3%. A-10

The employers share of retirement costs are set by the independent Board of Retirement (SBCERS) and paid by the County. The annual County Contribution has increased by $85.4 million or 228% over the past ten years (see Figure 8). The investment losses during FY 200809 had a huge impact on FYs 2010-11 through 2013-14 retirement rates as these losses needed to be absorbed into the ongoing rates. Smoothing formulas have enabled the rates to increase incrementally during these periods. At the same time, the projected rate of return included in the actuarial assumptions was reduced from 8.16% in FY 2010-11 to 7.75% for FYs 2011-13. While some ameliorative measures were recently approved: such as keeping the assumed rate of return at 7.75% for FY 2013-14, the Retirement Board has the sole authority to set rates and the actual impact on the FY 2013-14 rates will not be known until after FY 2011-12 is closed and the actuarial valuation study is complete. Moreover, these measures add to the total cost of the systems debt and ultimately must be paid. The Board of Retirements annual actuarial valuation


study may include unforeseen costs due to market returns and the effects of demographic changes that are not reflected in these projections. The Board of Supervisors approved a new retirement plan for General Members with a hire date on or after June 25, 2012 which will ultimately reduce future retirement costs. In September 2008, the County and the Retirement System adopted an Internal Revenue Code Section 401(h) account that provides for Other Post Employment Benefits with the County currently assuming a portion of the costs of retiree medical coverage, dependent upon years of service. The Countys defined benefit postemployment healthcare plan (OPEB Plan) provides medical benefits to eligible retired County employees and their beneficiaries pursuant to California Government Code Section 31694 et. seq. Pursuant to the OPEB Plan, the Board of Supervisors has determined to provide a monthly insurance premium subsidy from the 401(h) Account for Eligible Retired Participants participating in a County sponsored health insurance plan in the amount of $15 per year of credited service or $4 per year of credited service for those not enrolled in a County health plan. The County is required to calculate and record the annual required contribution of the employer, an amount actuarially determined. The contribution represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial liabilities over a period of fifteen years. The County contribution consists of two components: 1) the normal cost for the year for current active employees, and 2) a component for amortization of the total unfunded actuarial accrued liabilities (UAAL) of the OPEB Plan consisting of current retirees, current vested terminated, and current active employees. This forecast assumes increasing General Fund Contributions to meet these contribution requirements. The cost of OPEB is expected to increase 7% annually for current plans. The retiree medical program is eliminated for General Plan members hired on or after June 25, 2012, which will incrementally reduce the Countys costs over time. Appropriation of Prior Year Revenue: The cost to maintain services at a level approximating FY 2011-12, required the use of one-time local discretionary department reserves or fund balances. This strategy has enabled the County to retain a higher service level during years where the growth in expenditures exceeded the revenue growth. Departments employing this strategy include the departments of Public Health, Social Services, Housing and Community Development, County Counsel, Clerk RecorderAssessor, Parks, the Public Defender, District Attorney, Probation, and Sheriff. Through concessions and departmental savings, it is recommended that the General Fund backfill 50% of previously identified one-time funding for ongoing services to prevent further service level reductions. This change is the reason for the reduction in use of prior year revenue in FY 2012-13 but results in a higher level of General Fund Contribution. The maintenance of effort increases are projections of required local match for Public Health, Alcohol, Drug and Mental Health Services, Social Services, Public Works-Road Fund plus projections for the courts facilities mandate. A-11

Investing in the FutureIn recognition of continued expenditure growth outpacing revenue growth, strong fiscal planning is crucial to ensure core services can be maintained over the next several years. There are three areas that may require significant funding in the coming budgets. Fire Maintaining and Improving Current Service The Citygate Report on Fire Department Operations found that current revenue sources are not projected to rise fast enough to keep up with the rising cost of providing the current level of fire services. Further, the Report indicates that unless new sources of revenue are developed for the Department expenditures will exceed revenue by an aggregate of $14.8 million by FY 2015-16. Funding for a large number of capital projects has not been identified. The Citygate Report identified the immediate, near term and long-term needs of the Fire Department as: Immediate: $1.8 million in FY2012-13, increasing to an average of $4.0 million per year over the three following years just to maintain the current operation; Near-term: $12.1 million per year to implement the enhanced operational and support staffing identified in the Citygate Report as Phases 1-3 (excluding capital); and Long-term: Capital needs of $89 million, identified as Phases 1-3 which were estimated to require $6 million per year in annual debt service payments to implement. The Citygate Report states that there is not enough revenue flow in the near-term economy to address the fiscal needs without serious adjustments in the Countys budget priorities. The report also emphasizes that no single revenue enhancement strategy will be able to meet all of the operating needs. The same multi-prong approach is going to be required to address the current Capital Improvement Plan needs listed at approximately $89 million. The Board requested additional revenue options including a tax transfer from the County General Fund to the Fire District to provide sufficient resources for current and enhanced levels of service proposed in the Citygate report as revised by the Fire Chief before the Board on April 10, 2012. The transfer would replace the Fire Districts General Fund contribution with a tax base and a portion of the tax increment (20% or 25%) until the Fire District share reaches 16-17%. This additional revenue level will not be a permanent solution to meeting the continued cost increases in the Fire Department. An illustration of the possible increased funding for the Fire District, assuming the transfer of an amount equivalent to 20% of the incremental property tax growth is shown in figure 9 below.


Figure 9: Fire Department Tax Transfer($'s in millions)

Alcohol, Drug and Mental Health Services (ADMHS) The majority of revenues in ADMHS have historically been related to Medi-Cal services. The State reporting, claiming and reimbursement system for Medi-Cal is very complex and subject to significant adjustment long after the end of the budgeted fiscal year. As a result, ADMHS has incurred significant unbudgeted costs over the past decade. During FY 2007-08, the Department estimated existing and potential liabilities spanning multiple years at approximately $30 million. These included self-disclosed billing practices, outstanding Medi-Cal settlements and a State disallowance of certain childrens mental health programs, the Counseling and Education Centers (CEC) and the Multi-agency Integrated System of Care (MISC). Starting in FY 2008-09, ADMHS worked to improve systems, business practices and to develop a greater depth of staff to more accurately report and budget for Medi-Cal costs and the related revenues. In April 2012, a negotiated settlement between the County and State was reached on audit disallowances assessed for FY 2002-03 through FY 2005-06 and the County is now due a refund of approximately $5 million. While progress has been made, the improvements were hampered by a new and untested claiming system installed by ADMHS in July 2007 and the States installation of a new and not fully tested claiming system in December 2009. The Department had modest operating losses in FY 2008-09 through 2010-11 but is projecting a significant unfavorable variance in FY 2011-12. The 2011-12 loss reflects a combination of what are considered one-time issues and ongoing issues (primarily uninsured inpatient services). Acknowledging the complexity of these issues, the County is in the process of utilizing specialized consultants to review current systems, practices and staffing to identify weaknesses and opportunities for improvement. Additionally, there remains the risk of ongoing State audit adjustments long after the end of a given fiscal year and therefore the establishment of reserves for such potential liabilities will be considered in the coming year. Closing Comments The County Executive Officer recommends that any new funding that becomes available in FY 2011-12 or 2012-13, such as unanticipated growth in ongoing revenue streams like property and sales taxes, be used to reduce the one-time fund use and fund deferred maintenance projects. The cycle of service reductions is not sustainable for the long-term and therefore the priority must be to reduce the structural deficit as opportunities present themselves during the year, including revenue enhancements resulting from economic vitality and resident supported tax increases. Additionally the County must continue to provide core services and seek efficiencies wherever possible. Core services will focus on maintaining public safety, protecting our children and families and supporting sustainable communities.

Fire Department: Projected Tax Transfer Funding11-12 12-13 13-14 14-15 15-16 16-17 17-18 18-19 19-20 20-21

GF Base Funding Cumulative Increase Combined Fire Funding Annual Increase

$ 5.9

$ 5.9 0.5

$ 5.9 1.3 $ 7.2 $ 0.8

$ 5.9 $ 5.9 2.2 3.3

$ 5.9 4.5

$ 5.9 5.7

$ 5.9 $ 5.9 $ 5.9 7.0 8.3 9.7

$ 5.9

$ 6.4 $ 0.5

$ 8.1 $ 9.2 $ 0.9 $ 1.1

$ 10.4 $ 11.6 $ 12.9 $ 14.2 $ 15.6 $ 1.2 $ 1.2 $ 1.3 $ 1.3 $ 1.4

Sheriff New North County Jail Public safety is one of the Board of Supervisors core values and the need for a new jail has been well documented over the past two decades. This budget proposes a solution that will set aside General Fund discretionary revenue over a period of ten years to fund future jail operations with a goal of the jail becoming operational in FY 2017-18 (see Figure 10). The FY 2012-13 recommended budget includes a $2 million set-aside for future jail operations. Figure 10: Plan for Future Jail Operations FundingJAILOPERATIONSCASHFLOW($millions) 1112 1213 1314 1415 Beginning 1.0 3.0 6.3 ofYear GFC 1.0 2.0 3.3 4.6 Added Operating Cost Debt Service End 1.0 3.0 6.3 10.9 ofYear

1516 1617 1718 1819 1920 2021 2122 2223 10.9 16.1 22.9 15.7 9.9 5.3 2.1 0.4 6.1 7.6 9.1 10.8 12.6 14.4 16.4 18.5

(15.4) (15.8) (16.3) (16.8) (17.3) (17.8)

(0.9) (0.9) (0.9) (0.9) (0.9) (0.9) (0.9) (0.9) 16.1 22.9 15.7 9.9 5.3 2.1 0.4 0.3

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Guiding PrinciplesSanta Barbara Countys Strategic Plan is the overarching guide that defines and measures the expected results of County government services as illustrated in Figure 7. It includes six General Goals, three Organizational Values and six broad Policy Plan Areas that enable the County to focus on its priorities. The departmental budget pages (Section D) describe current year accomplishments and alignment of services to the six General Goals. The Goals were initially adopted by the Board of Supervisors on April 21, 1998 and revised on November 21, 2006 and include: Goal 1: EFFICIENT AND RESPONSIVE GOVERNMENT: An efficient professionally managed government able to anticipate and to effectively respond to the needs of the community; Goal 2: HEALTH AND SAFETY: Safe and healthy communities in which to live, work, and visit; Goal 3: ECONOMIC VITALITY: sustainable; A community that is economically vital & This section intentionally left blank.

Goal 4: QUALITY OF LIFE: A high quality of life for all residents; Goal 5: CITIZEN INVOLVEMENT: A County government that is accessible, open, and citizen-friendly; and Goal 6: FAMILIES AND CHILDREN: A community that fosters the safety and well-being of families and children. Organizational Values of accountability, customer service, and efficiency (ACE) are a critical component of the Strategic Plan and represent important principles that embody a work ethic that is embedded within all County efforts. While the context for public policy is constantly evolving, the organizations values reflect the fixed ideals of ethical public service.

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COUNTY STATISTICAL PROFILEOverviewCalifornia Counties Ranked by PopulationAs of July 1, 2011, the estimated population of Santa Barbara County (County) was 425,840, an increase of 0.4% compared to the previous years estimated population. When reviewing the Countys economic health, financial capacity, or delivery of municipal services to residents of unincorporated areas, the County compares itself with other counties (Benchmark Counties) from year to year. The eight Benchmark Counties are highlighted below and are considered to have common characteristics including, but not limited to, the following: total population of more than 250,000 but less than 500,000; suburban to rural environments; do not contain a large metropolitan city; and are known for their scenic beauty and environmental focus. Six are coastal or bay area counties.Total Population Rank 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 County LOS ANGELES SAN DIEGO ORANGE RIVERSIDE SAN BERNARDINO SANTA CLARA ALAMEDA SACRAMENTO CONTRA COSTA FRESNO KERN VENTURA SAN FRANCISCO SAN MATEO SAN JOAQUIN STANISLAUS SONOMA TULARE SANTA BARBARA MONTEREY SOLANO PLACER SAN LUIS OBISPO SANTA CRUZ MERCED MARIN BUTTE YOLO EL DORADO 7/1/2010 9,827,070 3,104,581 3,017,089 2,191,800 2,038,771 1,787,553 1,513,493 1,420,447 1,052,192 933,075 841,744 825,378 807,177 719,582 686,761 515,311 484,258 443,638 424,291 415,825 413,220 350,609 269,753 263,174 256,386 252,767 220,024 200,995 181,183 7/1/2011 9,857,567 3,131,254 3,043,964 2,226,552 2,059,630 1,805,861 1,525,655 1,430,537 1,061,132 941,965 848,553 830,215 814,088 725,245 693,589 518,461 486,479 448,965 425,840 419,710 413,635 355,687 270,739 264,824 258,678 254,114 220,570 201,645 181,653 Change % 0.3% 0.9% 0.9% 1.6% 1.0% 1.0% 0.8% 0.7% 0.8% 1.0% 0.8% 0.6% 0.9% 0.8% 1.0% 0.6% 0.5% 1.2% 0.4% 0.9% 0.1% 1.4% 0.4% 0.6% 0.9% 0.5% 0.2% 0.3% 0.3% Rank 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 County SHASTA IMPERIAL KINGS MADERA NAPA HUMBOLDT NEVADA SUTTER MENDOCINO YUBA LAKE TEHAMA SAN BENITO TUOLUMNE CALAVERAS SISKIYOU AMADOR LASSEN DEL NORTE GLENN COLUSA PLUMAS INYO MARIPOSA MONO TRINITY MODOC SIERRA ALPINE CALIFORNIA Total Population 7/1/2010 177,480 175,594 153,020 151,160 136,681 134,575 98,484 94,800 87,939 72,336 64,466 63,635 55,350 54,961 45,258 44,951 37,907 34,730 28,577 28,188 21,452 19,993 18,627 18,119 14,114 13,883 9,676 3,231 1,147 37,318,481 7/1/2011 177,675 178,169 152,739 152,281 137,732 134,484 98,155 95,351 87,669 72,554 63,703 63,798 55,684 54,393 45,002 44,750 37,366 34,283 28,520 28,201 21,564 19,774 18,470 17,963 14,164 13,555 9,522 3,179 1,109 37,578,616 Change % 0.1% 1.5% -0.2% 0.7% 0.8% -0.1% -0.3% 0.6% -0.3% 0.3% -1.2% 0.3% 0.6% -1.0% -0.6% -0.4% -1.4% -1.3% -0.2% 0.0% 0.5% -1.1% -0.8% -0.9% 0.4% -2.4% -1.6% -1.6% -3.3% 0.7%

Source: California Department of Finance, Demographic Research Unit, Table E-2

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County Statistical Profile (Cont'd)

AuthorityThe County was established by an act of the State Legislature on February 18, 1850. It is a general law county and political subdivision of the State of California. The constitution and laws of the state establish the Countys rights, powers, privileges, authority, functions, and duties. The

Documents

Santa Barbara County Budget 2012 to 2014